FISCAL DECENTRALIZATIO N MODULE: OUTLINE Roy Bahl Regents Professor of Economics, Emeritus Georgia...

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FISCAL DECENTRALIZATION MODULE: OUTLINE Roy Bahl Regents Professor of Economics, Emeritus Georgia State University September, 2015 Manila External Support for Decentralization Reforms & Local Governance Systems in the Asia Pacific: Better Performance, Higher Impact?

Transcript of FISCAL DECENTRALIZATIO N MODULE: OUTLINE Roy Bahl Regents Professor of Economics, Emeritus Georgia...

Page 1: FISCAL DECENTRALIZATIO N MODULE: OUTLINE Roy Bahl Regents Professor of Economics, Emeritus Georgia State University September, 2015 Manila External Support.

FISCAL DECENTRALIZATION MODULE: OUTLINE

Roy BahlRegents Professor of Economics, Emeritus

Georgia State University

September, 2015Manila

External Support for Decentralization Reforms & Local Governance Systems in the Asia Pacific:

Better Performance, Higher Impact?

Page 2: FISCAL DECENTRALIZATIO N MODULE: OUTLINE Roy Bahl Regents Professor of Economics, Emeritus Georgia State University September, 2015 Manila External Support.

WHAT WE WILL TALK ABOUT• The Financing Side of the budget of SNGs• Own Source Revenues• Intergovernmental Transfers• Equalization• Performance Grants

• Focus on the Practice in Asia

Page 3: FISCAL DECENTRALIZATIO N MODULE: OUTLINE Roy Bahl Regents Professor of Economics, Emeritus Georgia State University September, 2015 Manila External Support.

OWN SOURCE REVENUES OF SUBNATIONAL

GOVERNMENTSROY BAHL

REGENTS PROFESSOR OF ECONOMICS, EMERITUSGeorgia State University

September, 2015Manila

Page 4: FISCAL DECENTRALIZATIO N MODULE: OUTLINE Roy Bahl Regents Professor of Economics, Emeritus Georgia State University September, 2015 Manila External Support.

THE BENEFITS OF SUBNATIONAL GOVERNMENT REVENUES• Increased Accountability and better services• Diversified Administration• Hard Budget Constraint• Borrowing potential (Repayment)• Increased Revenue

Page 5: FISCAL DECENTRALIZATIO N MODULE: OUTLINE Roy Bahl Regents Professor of Economics, Emeritus Georgia State University September, 2015 Manila External Support.

THE DANGERS OF SUBNATIONAL GOVERNMENT REVENUES• Costly Tax Administration• Resource Misallocation• Regional Fiscal Disparities• Complicates Macroeconomic Policy• More Corruption?• Political Resistance

Page 6: FISCAL DECENTRALIZATIO N MODULE: OUTLINE Roy Bahl Regents Professor of Economics, Emeritus Georgia State University September, 2015 Manila External Support.

PROPERTY AND LAND TAXES: ADVANTAGES• Significant Revenue Potential• Not Regressive• Can be a Benefit Tax• Can Have a Positive Effect on Land Use• The Devil We Know

Page 7: FISCAL DECENTRALIZATIO N MODULE: OUTLINE Roy Bahl Regents Professor of Economics, Emeritus Georgia State University September, 2015 Manila External Support.

PROPERTY AND LAND TAXES: DANGERS• Revenue Potential is rarely realized• Administration is costly• Unpopular tax• Political Target• Visible• Judgmental assessment• Accrued wealth

Page 8: FISCAL DECENTRALIZATIO N MODULE: OUTLINE Roy Bahl Regents Professor of Economics, Emeritus Georgia State University September, 2015 Manila External Support.

Costly Administration

• Five steps are required for good administration• Identification of the property• Keeping records complete and updated• Valuation and revaluation• Collection• Appeals

Page 9: FISCAL DECENTRALIZATIO N MODULE: OUTLINE Roy Bahl Regents Professor of Economics, Emeritus Georgia State University September, 2015 Manila External Support.

WHY IS PROPERTY TAX REVENUE SO HARD TO RAISE?• TC/Y= (TC/TL) (TL/TXAV) (TXAV/TAV) (TAV/MV)

(MV/Y)

• TC = Tax collections• Y = GDP• TL = Tax liability• TXAV = Taxable assessed value• TAV = Total assessed value• MV = Market value

Page 10: FISCAL DECENTRALIZATIO N MODULE: OUTLINE Roy Bahl Regents Professor of Economics, Emeritus Georgia State University September, 2015 Manila External Support.

HOW CAN THE PROPERTY TAX BE REFORMED?• Get all the pieces on the table (ID, Assess, collect)• Consolidate land transfer, value capture and

property tax• Reduce Intergovernmental Transfers• Introduce a local Sales Tax??• Newcomers: Start simple (area?)

Page 11: FISCAL DECENTRALIZATIO N MODULE: OUTLINE Roy Bahl Regents Professor of Economics, Emeritus Georgia State University September, 2015 Manila External Support.

NON PROPERTY TAX REVENUES• Individual Income Tax• Payroll Taxes• Gross Receipts Tax• Selective Sales Taxes

• Services• Utilities

• Motor Vehicle Taxes• Motor Fuels, Licenses, Registration, Parking, Tolls

• Business Licenses• User Charges